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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
59
The distribution of the Company’s financial instruments which are measured at fair value on a recurring basis within the Valuation
Hierarchy was as follows:
December 31, 2014
Quoted Prices
in Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3) Fair
Value
(in millions)
Municipal securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 135 $ — $ 135
U.S. government and agency securities 1. . . . . . . . . . . . . . — 199 — 199
Corporate securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 618 — 618
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 178 — 178
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 56 — 69
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13 $ 1,186 $ — $ 1,199
December 31, 2013
Quoted Prices
in Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3) Fair
Value
(in millions)
Municipal securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 267 $ — $ 267
U.S. government and agency securities 1. . . . . . . . . . . . . . — 560 — 560
Corporate securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,426 — 1,426
Asset-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 364 — 364
Other 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 79 11 90
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ 2,696 $ 11 $ 2,707
1 Excludes amounts, recorded as restricted cash, held in escrow related to the U.S. merchant class litigation settlement of $540 million and $723 million
at December 31, 2014 and 2013, respectively, which would be included in Levels 1 and 2 of the Valuation Hierarchy. See Note 10 (Accrued Expenses
and Accrued Litigation) and Note 18 (Legal and Regulatory Proceedings) for further details.
2 The amounts classified within Level 3 of the Valuation Hierarchy at December 31, 2013, included within other assets, represented auction rate securities
(ARS), which were called at par during 2014.
The fair value of the Company’s available-for-sale municipal securities, U.S. government and agency securities, corporate securities,
asset-backed securities and other fixed income securities included in the Other category are based on quoted prices for similar
assets in active markets and are therefore included in Level 2 of the Valuation Hierarchy. The Company’s foreign currency derivative
contracts have also been classified within Level 2 in the Other category of the Valuation Hierarchy, as the fair value is based on
broker quotes for the same or similar derivative instruments. See Note 20 (Foreign Exchange Risk Management) for further details.
Financial Instruments - Non-Recurring Measurements
Certain financial instruments are carried on the consolidated balance sheet at cost, which approximates fair value due to their short-
term, highly liquid nature. These instruments include cash and cash equivalents, restricted cash, accounts receivable, settlement
due from customers, restricted security deposits held for customers, time deposits, prepaid expenses, accounts payable, settlement
due to customers and accrued expenses. In addition, nonmarketable equity investments are measured at fair value on a nonrecurring
basis for purposes of initial recognition and impairment testing.
Debt
The Company estimates the fair value of its long-term debt using the market pricing approach which applies market assumptions
for relevant though not directly comparable undertakings. Long-term debt is classified as Level 2 of the Valuation Hierarchy. At
December 31, 2014, the carrying value and fair value of long-term debt was $1.5 billion. The Company did not have any long-
term debt at December 31, 2013. See Note 12 (Debt).